The transition from childhood to adulthood may in some ways seem like a long, drawn-out process. Many times, you may feel like you still have one foot in the door of your parents’ house. At some point in your 20’s, though, a jolt will awaken you to the fact that you really are on your own.
Financial independence can be freeing, and a little frightening. It’s a wise move to take some financial advice from the experts. Here are eight money tips specifically for young adults who are just striking out on their own.
Make insurance a top priority. One of the marks of maturity is the ability to plan for calamity, even if you don’t see it coming. A great financial trick for twenty-somethings is to employ an insurance company to do that planning on your behalf. This means you should get a policy to cover your vehicle, your apartment rental and your health. If this sounds like a drag, you’re right. But it’s better than owing someone else for an accident for the next few decades.
If you opt to stay on your parents’ plan for a better monthly payment, pay the premium consistently, and on time.
Establish a budget. Then, stick to it.
Establish great credit habits. There will be time in the future when you will need good credit, and when that time comes, you’ll want to be ready. Until then, establish great credit habits by using your credit cards sparingly, keeping your debt low, paying your bills on time, every time and focusing on establishing financial routine and habits you can trust. This means spending only what you have, not what you might have next time you get paid.
Avoid restaurants, and instead, learn to cook.
Consider yourself your best resource. Your earning potential has far more leverage today than credit or debt. That means you can be investing in professional accreditation and relevant trade certifications instead of a hot car or the sharpest wardrobe. Bonus: You won’t have to wait decades for this investment to pay off. In fact, you may see the results within a year or two when you achieve your first raise or promotion at work.
Set your parents free. Oddly, your folks may enjoy bailing you out. It keeps you close and you can’t blame them for wanting that. It’s not uncommon for otherwise relationally healthy young adults to rely on their folks for a few items here and there – and for the previous generation to oblige. To free your parents, you’ll need to spend more each month on necessities, but the financial problem-solving skills you acquire will go to work for you later.
Get your parents’ advice. Wait, didn’t we just say cut the folks loose? Yes, but one of the wisest things you can do is get their guidance on your new lifestyle. They have, after all, “been there, done that,” and know what a potential pitfall looks like – as well as a great financial opportunity. Your parents’ money tips may be the best thing for your new routine, so when in doubt, phone home.
Educate yourself. Learn what a 401k is, whether your employer matches contributions, and what happens to that cash over 40 years. Read the “Money” section of every newspaper you pick up, and tune in to what famous financial role models are doing. What is liquidity? Compound interest? Trade reality shows and celebrity gossip for reading material that can put you ahead.
What financial lessons have you learned as a young adult so far? What lessons do you wish you had learned when you were starting out? Would you add anything to this list? Comment below or tweet us @CESIsolutions.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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